2020 (1) TMI 1442 - AT - Income Tax

Validity of reopening u/s.147 - Addition of bogus bill in the name of M/s. Vee Gee Industrial Enterprises - information was received from the office of ADIT (Inv.)-II, Faridabad along with bank statement of the assessee wherein assessee-company had issued a cheque in favour of M/s. Vee Gee Industrial Enterprises as mainly engaged in large value credits from the business and individuals in other banks followed by immediate cash withdrawal - HELD THAT - From the perusal of the reasons recorded, we find that the Investigation Wing during the course of inquiry has found that assessee has issued a cheque in favour of M/s. Vee Gee Industrial Enterprises and said entity was not found to carry out any business nor any statutory payment like VAT/Excise Duty, etc. was paid which was statutory requirement for a person or entity carrying out such a trade - there is no freight payment also. Since in the inquiry, specific cheque number and account was found which is tallying with the assessee s bank account then there is a prima facie reason to believe that transaction is not genuine and such a material is sufficient to clothe the Assessing Officer to acquire jurisdiction to reopen the assessment. AO at the stage of recording the reasons and issuance of notice need not need to establish fact. Thus, the finding of the Ld. CIT (A) upholding the validity of reopening u/s.147 is upheld. Bogus purchases - AO had issued summons u/s.131 to the proprietor of the said entity from whom assessee has made purchases, but that remained uncomplied with nor assessee could produce the party. However, on the other hand, the sources of purchase have gone from the books of the assessee and there is a corresponding sale. In such a situation at the most even if assessee has made bogus purchases through cheque from the sources disclosed in the books of account and thereafter has taken accommodation entry and has received the cash back, then the same goods must have purchased from the grey market in cash, Since sales and purchase quantity wise details in the trading account has not been disturbed then at the most it could be a case of suppression of gross profit. Under these circumstances, we hold that addition on account of enhancement GP on the said purchase would be reasonable. Hence, we direct the Assessing Officer to apply 8% GP on the alleged bogus purchases - Appeal of the assessee is partly allowed.

Summary

Issues: Validity of reopening u/s.147, Addition of ?8 lacs on account of alleged bogus bill

Validity of Reopening u/s.147:
The appeal was filed against the order for the quantum of assessment passed u/s.143(3)/147 for the Assessment Year 2009-10. The assessee challenged the validity of reopening u/s.147 and the addition of ?8 lacs on account of an alleged bogus bill issued in the name of M/s. Vee Gee Industrial Enterprises. The Assessing Officer reopened the case based on information received regarding a cheque issued by the assessee to M/s. Vee Gee Industrial Enterprises, which was suspected of providing bogus billing. The assessee objected to the reopening, stating that the purchase from M/s. Vee Gee Industrial Enterprises was genuine as the supplier was registered with VAT and TIN numbers. However, the Assessing Officer, after inquiry and non-compliance with summons, concluded the purchase was bogus and made the addition of ?8 lacs.

Addition of ?8 lacs on account of alleged bogus bill:
The CIT(A) dismissed the objection to the validity of reopening u/s.147, stating that the Assessing Officer had applied his mind and had sufficient information to form a reason to believe. Regarding the addition of ?8 lacs, the CIT(A) noted the non-compliance of the proprietor of M/s. Vee Gee Industrial Enterprises with summons and lack of evidence from the assessee, confirming the addition. The appellant argued that the Assessing Officer did not independently apply his mind for reopening, citing various judgments. The appellant contended that the purchases were genuine, supported by invoices and details, and suggested applying a GP rate of 6%. The Tribunal upheld the validity of reopening u/s.147 based on the information received, and directed the Assessing Officer to apply an 8% GP on the alleged bogus purchases, partially allowing the appeal.

In conclusion, the Tribunal upheld the validity of the reopening u/s.147 based on the prima facie reasons provided by the Investigation Wing. The Tribunal also directed the application of an 8% GP rate on the alleged bogus purchases, partially allowing the appeal.